February 7, 2013

As detailed in this Chicago Tribune article, federal prosecutors have found a white-collar case in which they think the federal guidelines are not tough enough. Here are the basics:

In the spring of 2010, the city of Dixon was in a financial death spiral, with a budget deficit closing in on $4 million, no working cash flow and drastic cuts needed in services and hiring to stay afloat. Longtime Comptroller Rita Crundwell gave commissioners a familiar excuse for the crisis: Declining tax revenues in a bad economy and late state payments had drained the town's coffers.

Yet Crundwell was living it up with massive amounts of stolen taxpayer money. In 2010 alone, federal authorities say, Crundwell plundered more than $5.5 million, money that went to buy an 80-acre ranch and farmhouse outside town, expand her championship horse business, fund lavish birthday parties for herself in tony Venice Beach, Fla., and buy luxury vehicles and jewelry.

In newly filed court papers ahead of Crundwell's sentencing next week, federal prosecutors are seeking as much as 20 years in prison, laying out in the greatest detail yet how her nearly $54 million in thefts beginning in 1991 devastated the northwest Illinois town's budget as well as public confidence in its government officials....

Crundwell ordinarily would face a sentence of about 12.5 to 16 years in prison under federal sentencing guidelines. But prosecutors want U.S. District Judge Philip Reinhard in Rockford to go higher because of the decades-long scheme and staggering losses.

In a response filed Tuesday, Crundwell's attorney, Public Defender Paul Gaziano, asked for a sentence at the low end of the guidelines. Gaziano noted that a 20-year sentence would likely mean that Crundwell, 60, would spend the rest of her life in prison. He also argued that she has cooperated with authorities once the fraud was uncovered last April and has helped the town recoup some of its losses by selling off millions of dollars in horses, real estate and other assets....

When Crundwell pleaded guilty last November to a single count of wire fraud, acting U.S. Attorney Gary Shapiro called it the largest theft of government funds in Illinois history. In her plea agreement with prosecutors, Crundwell, who served as the city's comptroller starting in 1983, admitted transferring money from city funds into a bank account bearing her name that she secretly opened in December 1990.

The thefts grew bolder over time, but it wasn't until she started spending long periods away from City Hall, traveling the country to compete in horse shows, that her scheme unraveled. In 2011, the city clerk, filling in for Crundwell, discovered the secret account and informed the mayor, who tipped off law enforcement, authorities have said.

In the early years, Crundwell annually stole a few hundred thousand dollars, but by the late 1990s, as her quarter-horse business expanded and gained national attention, the thefts exploded, growing to more than $1 million in 1999, then nearly doubling to $2 million the next year, according to prosecutors. The town's financial straits worsened, and cuts to each annual budget multiplied. By 2008, the shortfalls reached crisis levels. At a special City Council meeting that March, Finance Commissioner Roy Bridgeman reported that the budget deficit approached nearly $1.2 million and warned of staff cutbacks, according to court records.

Professor Todd Haugh sent me an intriguing note about this case after the feds filed its sentencing documents, which he has graciously allowed me to post here:

The government's sentencing memorandum is pretty incredible. Not only does it ask for an upward departure from the sentencing guidelines (which are already at 210-262 months based on the dollar amount and her position of trust) to a sentence of 27-34 years (324-405 months), but it includes a five-part timeline/slideshow detailing the crime and Crundwell's personal expenditures. I've never seen anything like that in 10 years of defending white collar cases, particularly when the original guideline range is that high already.... The tone of the slideshow, not surprisingly, is greed, greed, greed, and it's filled with color pictures of all the things this women bought with the illegally-obtained funds.

To put the possible sentence in perspective, if Crundwell gets anywhere close to 34 years, she will be in the upper-echelon of white collar defendants receiving heightened sentences. Skilling got 24 years; Rajaratnum got 11; Rigas got 20; Peter Madoff got 10; etc. She would be getting close to even the big Ponzi schemers (the CEO of Peregrine just got 50 years for a $100M Ponzi)....

To me, this is classic government piling on of a white collar offender in the name of assuaging community anger (which is highly concentrated here). It does very little to further the goals of sentencing (I suppose retributivists could argue the additional 100+ months are necessary but even that seems a stretch given the already high sentence), and it's simply advancing the crime master narrative of "all white collar offenders should be given life sentences because they are greedy and evil."... But it also demonstrates how the fraud guideline becomes a little silly at the high loss levels and how 3553 can be a weapon for the prosecution, not just a shield for the defense.

Comments

Personally I prefer the Chinese answer to revealed corruption by government officials. Execution would, I believe, be an entirely appropriate response to the sort of crime detailed here.

Posted by: Soronel Haetir | Feb 7, 2013 12:29:33 PM

I'm with you with the addition that we also use another chinese procedure.

Make the family pay for the bullet!

Posted by: rodsmith | Feb 7, 2013 2:07:49 PM

Maybe Professor Haugh should read the sentencing memorandum filed by the government so he can understand the seriousness of the crime committed. That memorandum describes how a PUBLIC OFFICIAL committed the largest theft in U.S. History. More importantly, besides the financial loss, it provides great detail about the non-monetary harms suffered by the community. For example, the community had to reduce its workforce, could not make improvements, and the public now has a lack of confidence -- these are things not accounted for by the Guidelines, but which a Court should. It does not, as claimed by Professor Haugh, simply claim "greed, greed, greed". I am deeply disappointed in Professor Haugh's comments -- like many in the professor profession, they simply over react to a prosecutor's position, without any real analysis. Shame on him.

Posted by: Jim Stone | Feb 7, 2013 3:00:18 PM

Mr. Stone,

I appreciate the comment. I did indeed read the government's sentencing memorandum. I was reacting to the request for an additional four sentencing levels, which results in an additional 100 or so months of imprisonment for a 60-year-old defendant, which if granted would put her with the ranks of some of America's most notorious white collar criminals. I was also reacting to the timeline with color pictures attached to the memorandum, which is aimed at demonstrating the defendant's greed--I think it's tough to deny that if you look at how the information is presented. It's not that the government is wrong to seek a stiff sentence--it's well deserved here and would be met (overly so, I still believe) by a within-guidelines sentence--my point is that an additional 100 months on top of an already 20+ year sentence does little to advance the goals of sentencing. And her status as a public official is taken into account by the guidelines--she is already receiving a two-level increase for abusing a position of public trust. That Dixon had to reduce its workforce, could not make improvements, and the public now has a lack of confidence are all factors that, while rightly should impact the sentencing decision, are taken into account by the various increases in offense levels, particularly here where the defendant is receiving a 24 level increase for the amount of the loss. My comments aren't an overreaction to the prosecutor's position; they are a reaction to a broken fraud guideline at high loss levels and what, from my perspective, is a request that makes little sense once it's framed by the purposes of sentencing, rather than victim anger.

Posted by: Todd Haugh | Feb 7, 2013 4:49:40 PM

Likewise, I appreciate your response. I guess my last thought is that Crundwell is, in fact, one of America's most notorious white collar criminals given the amount of public money she stole, and how she spent it. Let's see how the Judge calls it.

Posted by: Jim Stone | Feb 7, 2013 5:04:26 PM

Jim:

I don't give a rats ass for the community, to be blunt. They should be angry at themselves because as far as I'm concerned every single one of them are a guilty as she. It is this cheap ass Midwestern attitude that says we are going to save 10K a year on an auditor that cost them their precious $54 million. The phrase "penny wise and pound foolish springs to mind".

Posted by: Daniel | Feb 7, 2013 5:27:25 PM

Post a comment

In the body of your email, please indicate if you are a professor, student, prosecutor, defense attorney, etc. so I can gain a sense of who is reading my blog. Thank you, DAB